Closing the Gender Pay Gap within Firms: Evidence from a Field Experiment on Promoting Pay Equity

Abstract

We present a natural field experiment on promoting pay equity through simple and gender-blind modifications of the salary planning process in a large multinational company. The experiment takes place among 622 middle managers overseeing 8570 employees. The treatments provide for different variants of a decision guidance for middle managers and a budget reallocation between teams aimed at promoting pay equity in the salary planning process. We document a pronounced gender gap in salary increases in the control group of around 7 percent. The treatments serve to close this gap, with the combination of providing a proposed salary increase and reallocating the budget accordingly being the most effective. We find no evidence that the decision guidance undermines performance differentiation. We thus show that simple modifications of the salary planning process can go a long way toward achieving pay equity without compromising managerial autonomy.